With the FSA review highlighting weaknesses in the assessment of borrowers’ affordability and suitability for products, RPC said mis-selling claims could be on a scale last seen during the Pensions Review and mortgage endowment crisis. It stated arrears in the non-conforming sector were 20 times higher than for conventional mortgages and could rise following interest rate increases.
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Robbie Constance, solicitor at RPC, said: “Rate rises are bad news for borrowers. Already over-stretched, many in the non-conforming sector are likely to blame their inability to pay on the lenders and advisers that recommended their mortgage. Public criticism from the FSA encourages complaints – and not just against those five firms facing enforcement action.
“With the FSA now identifying evidence of mis-selling in the non-conforming sector, it is effectively inviting borrowers to bring claims.
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It has published two additional reports this week into interest only and mortgages in retirement, pointing at weaknesses in the way these products are sold. Where the FSA goes, claims follow.”
However, Thomas Reeh, chief executive of blackandwhite
.co.uk, said: “This is a scurrilous claim and unfounded. If you look at the Financial Ombudsman Service complaints for 2006, a minority of complaints are related to mortgages. Mortgages are part of a very regulated sales process and brokers are doing a very good job in their recommendations.”
